We comment on the IASB's joint venture proposal
14 Jan 2008
Deloitte has submitted comments to the IASB on Exposure Draft ED 9 Joint Arrangements, which the IASB published on 13 September 2007. If finalised, the ED would replace IAS 31.
- recognise both the individual assets to which they have rights and the liabilities for which they are responsible, even if the joint arrangement operates in a separate legal entity; and
- recognise an interest in a share of the outcome generated by the activities of a group of assets and liabilities subject to joint control using the equity method. Proportionate consolidation would not be permitted.
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Part of the IASB's strategy with respect to its short-term convergence agenda is to identify what the Board concludes to be the highest quality solution available from the current population of accounting standards and to move to that standard. We support this approach. However, in ED 9, the IASB has not demonstrated nor put forward conclusive evidence that the approach chosen, i.e. equity accounting, is the highest quality solution for interests in joint ventures, something which the Board acknowledges in its basis for conclusions to the proposed Standard. As well as eliminating proportionate consolidation, ED 9 proposes a new approach, focussing on contractual rights and obligations rather than the legal form of arrangements. However, as ED 9 is poorly drafted and the IASB's objectives and its rationale for those objectives are not clearly articulated, the requirements and their application are unclear. |